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NY regulator sets out BitLicense plans

17 July 2014  |  5788 views  |  0 Bitcoin

New York state's financial services regulator has set out the details of its planned 'Bitlicense' framework for firms dealing with virtual currencies.

The New York State Department of Financial Services (NY DFS) has been working on the framework for around a year as it bids to bring in regulation designed to boost consumer protections and guard against money laundering related to bitcoin and other crypto-currencies. The plans (PDF) will now be open for public comment for 45 days.

"We have sought to strike an appropriate balance that helps protect consumers and root out illegal activity - without stifling beneficial innovation. Setting up common sense rules of the road is vital to the long-term future of the virtual currency industry, as well as the safety and soundness of customer assets," says NY DFS superintendent Benjamin Lawsky.

The licenses will be required for firms that receive or transmit virtual currency on behalf of consumers as well as those that store or maintain custody or control of currencies on behalf of customers. Other firms affected are those that convert the likes of bitcoin into fiat currency, those that buy and sell virtual currency as a customer business, and those that control, administer or issue virtual currency.

Among the planned requirements are that firms hold as much virtual currency as they owe to third parties, provide receipts, have a complaints policy in place, and provide disclosures of risks to consumers.

To tackle money laundering, license-holders will be required to verify the identity of account holders and report all suspected fraud. Meanwhile, they will also need to keep books and submit quarterly financial statements to the NY DFS. On security, companies will need a full cyber-security programme, have a designated chief information security officer and business continuity and disaster recovery plan in place.

In a post on Reddit, Lawsky concedes that the more libertarian-minded bitcoin enthusiasts will be unhappy with the plans and commentators have been vocal in slamming many of the provisions.

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